TRINITI analysis suggests establishing Rail Baltic joint venture as soon as possible


According to a legal study conducted by Pan-Baltic legal alliance TRINITI, commissioned by the Estonian Technical Surveillance Authority to analyse the legal aspects of establishing a Rail Baltic joint venture, the company should be set up as soon as possible, as it is crucial to submit the bid for European Union funding on behalf of the joint beneficiary before the next budget period begins. The primary option for funding is to combine financing from the Connecting Europe Facility with contributions from e.g. the European Investment Bank or the Nordic Investment Bank.

TRINITI Tallinn’s partner and Rail Baltic project coordinator Tõnis Tamme said that the comprehensive study, published in full on TSA’s website, analysed several aspects related to establishing the joint venture for managing the new railway, ranging from the optimal corporate structure, funding and taxation to public procurement procedures across the Baltic countries. “The study involved 8 partners in altogether five countries, who contributed towards a detailed overview that would allow the Baltic governments to conclude the negotiations over establishing the Rail Baltic joint venture,” noted Tamme.

According to Miiko Peris, coordinating Rail Baltic project manager at the Estonian Ministry of Economy and Communications, the study was a joint analysis covering all the Baltic countries. “It is a very detailed report and has given a substantial outcome, especially as it reinforced the necessity to establish a joint venture for the Rail Baltic project,” said Peris. This has been the common practice in other similar projects as well. There are currently ongoing discussions being held to reach a consensus and Estonia is open to compromises that would lead to the establishment of a joint venture with reasonable functionality, and not an empty shell. “The primary function of the joint venture at this stage of development would be act as the beneficiary of European Union funding,” stressed Peris.

There are no major restrictions or corporate limitations to headquarter locations from either a tax or legal perspective in any of the three countries under review, but the three Baltic prime ministers have declared that as a political decision Riga would be the preferred location for Rail Baltic’s corporate headquarters.

Currently the legislation in all three countries does not allow for direct state ownership in companies registered overseas, but this could be mitigated by respective legislative changes or by establishing subsidiaries, which would eventually determine the joint venture’s corporate structure and the necessary investment into equity capital.

Tamme highlighted the creation of cross-border railway regulation, designed specifically for Rail Baltic, as one of the most important suggestions – this would focus on setting infrastructure fees, allocating capacity, dispute resolution and coordination of future international cooperation. “This solution would allow for Finland and Poland to be involved in the project as well, especially since they have expressed active interest to participate in the Rail Baltic project,” explained Tamme.

The study analysed the main financial and legal aspects concerning the management of Rail Baltic’s 1435 mm rail gauge network by comparing data from Estonia, Latvia and Lithuania. The pan-Baltic legal alliance TRINITI conducted the study with its several international cooperation partners – Deloitte analysed tax issues, Keystone Advisors performed the financial analysis, Innopolis investigated matters related to EU funding, leading international law firm Norton Rose studied European Union legislation and related international experience and Poland’s largest law firm Domanski Zakrzewski Palinka gave an overview of Polish railway legislation.